(1) Subject to Subsection (2), a credit for reinsurance ceded under Section 31A-17-404 or 31A-17-404.1 is not allowed unless, in addition to meeting the requirements of Section 31A-17-404 or 31A-17-404.1, the reinsurance agreement provides in substance that if the ceding insurer is insolvent, the reinsurance is payable by the assuming insurer: (a) on the basis of the liability of the ceding insurer under the contract or contracts reinsured; (b) without diminution because of the insolvency of the ceding insurer; and (c) directly to the ceding insurer or to its domiciliary liquidator or receiver.

(a) on the basis of the liability of the ceding insurer under the contract or contracts reinsured;

(b) without diminution because of the insolvency of the ceding insurer; and

(c) directly to the ceding insurer or to its domiciliary liquidator or receiver.

(2) Subsection (1) applies except if: (a) a contract specifically provides another payee of the insurance in the event of the insolvency of the ceding insurer; or (b) the assuming insurer, with the consent of the one or more direct insureds, assumes the policy obligations of the ceding insurer: (i) as direct obligations of the assuming insurer to the payees under the policies; and (ii) in substitution for the obligations of the ceding insurer to the payees.

(a) a contract specifically provides another payee of the insurance in the event of the insolvency of the ceding insurer; or

(b) the assuming insurer, with the consent of the one or more direct insureds, assumes the policy obligations of the ceding insurer: (i) as direct obligations of the assuming insurer to the payees under the policies; and (ii) in substitution for the obligations of the ceding insurer to the payees.

(i) as direct obligations of the assuming insurer to the payees under the policies; and

(ii) in substitution for the obligations of the ceding insurer to the payees.